Blackstone boosts land bank with US$8b deal for BioMed Realty

Blackstone Group agreed to buy BioMed Realty Trust, a supplier of office space to health care companies, in a deal valued at US$8 billion, adding to the private equity firm's huge real estate portfolio.

BioMed's shares were up 8.6 per cent at US$23.45 in premarket trading, just shy of the offer price of US$23.75.

Real estate has become Blackstone's most high-profile and lucrative business, and the company has been snapping up commercial properties across the United States and Europe.

The all-cash offer, by Blackstone's real estate arm, represents a premium of 10 per cent to BioMed's close of US$21.59 on October 7.

The offer represents a premium of 24 per cent to BioMed's closing price on September 22, when Blackstone's interest was first reported.

The biotech and pharma industry has experienced robust growth in recent years due to an ageing population and faster Food and Drug Administration approvals.

Analysts say this in turn has driven demand for additional lab and office space for such companies.

BioMed, which owns office buildings catering to health care companies, has interests in properties comprising about 18.8 million square feet.

The company's shares have been trading at a discount, affected by volatile earnings and a lower-quality portfolio than its closest rival Alexandria Real Estate Equities, BMO Capital Market analysts said in a note last month.

Demand for high-quality, institutional real estate to support the unprecedented growth of the life science industry is at historic levels, BioMed chief executive Alan Gold said.

The deal is expected to close in the first quarter of 2016.

Morgan Stanley is lead financial adviser to BioMed Realty. Citigroup Global Markets, JP Morgan Securities and Bank of America Merrill Lynch are advising Blackstone.